Abercrombie & Fitch (ANF) Stock Sinking Today Following Ratings Cut
NEW YORK (TheStreet) -- Shares of Abercrombie & Fitch (ANF) - Get Report are sinking, down 4.06% to $23.85 in mid-morning trading Thursday, after the teen apparel retailer was downgraded to "underweight" from "equal weight" by analysts at Morgan Stanley this morning.
The firm also lowered its price target to $18 from $28, saying teen retailers are in a structural decline.
Morgan Stanley cut Abercrombie's fiscal year 2015 earnings estimate to $1.30 per share. Analysts at the firm said they are skeptical that Abercrombie's international business can turn around.
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Abercrombie is facing a Supreme Court battle over the retailer's rejection of a Muslim job applicant at its Tulsa, OK store, because she wore a head scarf, the Wall Street Journal reports.
The company says the head scarf an applicant wore to the job interview violated Abercrombie's "look policy," a dress code requiring its staff to wear clothing similar to what the store sells, the Journal added.
New Albany, OH-based Abercrombie & Fitch is a specialty retailer that operates stores and direct-to-consumer operations. The company sells a varitey of products, including casual sportswear apparel, personal care products, and accessories.
Separately, TheStreet Ratings team rates ABERCROMBIE & FITCH as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate ABERCROMBIE & FITCH (ANF) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its increase in net income, good cash flow from operations and growth in earnings per share. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Specialty Retail industry. The net income increased by 216.5% when compared to the same quarter one year prior, rising from -$15.64 million to $18.23 million.
- Net operating cash flow has significantly increased by 350.89% to $53.79 million when compared to the same quarter last year. In addition, ABERCROMBIE & FITCH has also vastly surpassed the industry average cash flow growth rate of -19.40%.
- ANF's debt-to-equity ratio is very low at 0.25 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.75 is somewhat weak and could be cause for future problems.
- ANF's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 26.02%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Although its share price is down sharply from a year ago, do not assume that it can now be tagged as cheap and attractive. The reality is that, based on its current price in relation to its earnings, ANF is still more expensive than most of the other companies in its industry.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Specialty Retail industry and the overall market, ABERCROMBIE & FITCH's return on equity is significantly below that of the industry average and is below that of the S&P 500.
- You can view the full analysis from the report here: ANF Ratings Report
